The Board of Audit of Japan has published a critical report on the annual audit of the government’s final accounts of expenditures and revenues.

It highlights massive carryovers in supplementary budgets and a lack of verification and explanation concerning grants to local governments.

As the new Ishiba administration prepares to compile a large supplementary budget to give impetus to the economy, it should face the audit results squarely and reform the government’s unrestrained practices that clearly signal disregard for fiscal discipline.

Over the four years since fiscal 2020, the government repeatedly enacted huge extra budgets totaling more than 150 trillion yen ($983.1 billion) in response to the COVID-19 pandemic and rising prices.

These spending plans are generally executed in a way that integrates the expenditures from them with those from the initial budgets, making their usage opaque.

This time, the Board of Audit focused on projects that could be examined separately, inspecting 138 of 1,218-line items financed by supplementary budgets in fiscal 2022.

The board found that 46 percent of the total amount, approximately 19 trillion yen, was not used within the fiscal year and carried over to the next. Of this, 1.5 trillion yen budgeted to fund 34 projects was entirely carried over, and ultimately, 600 billion yen ended up being unusable and was treated as “unnecessary.”

Even though parts of the expenditures listed in the extra budgets were intended for emergency responses to the pandemic, the findings indicate that the necessity and urgency of the proposed outlays were not scrutinized sufficiently and the figures were inflated as a result.

While it is positive that some wasteful expenditures were canceled, the extra spending plans seemed aimed at prioritizing political appeal, which effectively allowed for lenient assessments. This points to a serious problem with the government’s budgeting approach.

The Ministry of Finance and relevant ministries need to investigate the processes that lead to budgetary lapses and fiscal mismanagement and work to correct the problems.

We urge them to establish a system to disclose when and how each project and program in the supplementary budgets is carried out so the overall picture can be grasped accurately for assessment.

The report also re-examined “local revitalization special grants” to help local governments deal with the economic repercussions from the pandemic. Of the approximately 18 trillion yen distributed to local administrations under the program, 3.2 trillion yen turned out to be “unnecessary.”

Uses with no obvious connection to COVID-19 were detected, and the amount that should be returned to the central government, including fraudulent receipts of benefits, reached 20 billion yen, with 17 billion yen still unreturned.

According to the Board of Audit, the government did not comprehensively grasp how each prefecture and municipality spent the grants. Although it required local governments to verify and publish the effects of the expenditures, this was not properly implemented.

Last month, Prime Minister Shigeru Ishiba announced his intention to formulate a supplementary budget exceeding last year’s 13 trillion yen.

If the Ishiba administration continues the “size-first” budgeting approach, it rightfully should be accused of disregarding the Board of Audit’s report and the rules of the Fiscal Law, which designate supplementary budget items as “particularly urgent expenses.”

In terms of measures against rising prices, plans are in the cards to increase grants to local governments. They, in turn, should be obliged to scrutinize how the funds are used and conduct post-implementation reviews to evaluate the effects.

The central government has a duty to analyze the overall situation regarding allocations to local governments. Both the central and local administrations should at least fulfill their respective explanatory responsibilities and accountabilities.

Lax spending cannot be ignored to ensure the public understands and supports fiscal policies. The Diet should reconfirm its heavy responsibility of checking budgets and the final accounts of expenditures and revenues.

--The Asahi Shimbun, Nov. 9